Question

Each year the demand for lawyers remains constant. However, the number of law graduates continually increases each year. Assume these graduates wish to work in the legal profession. The supply and demand curves mentioned below refer to the market for legal services.

Answer the following questions:

a. The increased number of law graduates will have an impact on legal services in what way? . Type DR for Demand shifts Right, DL Demand shifts Left, SR Supply shifts Right, SL Supply shifts Left or U for Unknown.

b. The film “The Wolf of Wall Street” has changed many law students’ opinions on the finance industry. As a result, a large percentage of the law graduates have decided not to enter the legal services profession and instead pursue a career in finance after graduation. Which curve will be affected and in what way? . Type DR for Demand shifts Right, DL Demand shifts Left, SR Supply shifts Right, SL Supply shifts Left, U for Unknown.

c. Combining your answers from part a. and part b., if the magnitude of the two changes are equal, what will be the resulting effect on the market price? . Type H for Higher, S for remains the Same, L for Lower or U for Unknown.  

Answer 1

Answer a) SR - Supply shifts Right

The increased number of law graduates will shift the supply curve for legal services to the right because when the number of law graduates increases, the supply of labor in the market for law services increases, hence when the supply increases, the supply curve shifts to the right.

Answer b)  SL - Supply shifts Left

When a large percentage of the law graduates have decided not to enter the legal services profession and instead pursue a career in finance after graduation due to change in perception of the students, the supply curve of labor in the market for law services decreases, hence when the supply decreases, the supply curve shifts to the left.

Answer c) S - remains the Same

If the magnitude of the two changes are equal, the resulting effect on the market price would be constant i.e. it would remain the same. This is because when the number of law graduates increases, the supply curve shifts to the right and when the number of law graduates decreases because they want to pursue a career in finance, the supply curve shifts to the left. Now, if the supply curve shifts to the right first and then again shifts to the left by the same proportion, the final supply curve would remain unchanged in the same position as it was before.